Certainty Risk and Uncertainty

Managers make decisions in the present for actions in the future and all decisions contain elements that cannot be known or predicted e.g. a competitor's reaction, inflation rates in future etc. Decisions are therefore made either under conditions of certainty, uncertainty or risk.Under certainty we know what will happen in the future. Under risk the probability of each possible outcome is known. Under uncertainty we do not know the probabilities and may be not even the possible outcomes.

Under conditions of certainty there is accurate, measurable, reliable information available on which to base decisions. Where predictability is lower a condition of risk exists. Complete information is unavailable but we have a good idea of the probability of particular outcomes. Under uncertainty, however, very little is known and decisions under these conditions may give the decision maker sleepless nights.

Note

Few decisions are received happily by everyone. People will react either positively or negatively to decisions.
A decision may be okay for the organization but may cause problems for the decision maker himself. The decision maker must therefore clearly understand how the decision is going to be viewed by staff members, how it will affect him and others in the organization. Decisions have certain characteristics and that is why they affect different people differently.

    (a)    Decisions vary in importance
    (b)    Decisions are made at all organizational levels
    (c)    Decisions differ in urgency
    (d)    Decisions are made by both individuals and groups
    (e)    Decisions vary in complexity.